Red Flag 5: Companies in Which the Chairman and the CEO Are the Same Person

This one still applies to most American companies, though there have been signs of some movement toward the system in the United Kingdom, where the jobs are usually separated. The justification for having one executive do both jobs is that there is no doubt who is leading the company and it reduces the potential for clashes. The argument from corporate governance experts is that it means one person sets the agenda and controls the flow of information to the members of the board, which reduces the chances they will be told the bad news until it is too late. In a sense, the CEO is also part of a board that is evaluating himself or herself.